Understanding of letters of credit and the main points to note

Letter of credit popularly understood that the consignor in order to get the payment LC is bank credit As long as the consignor submits a correct set of documents, the bank will pay the bank only to check whether your documents are consistent with the requirements in the LC The documents are consistent The bank will pay so when doing LC It is especially careful It is possible that a careless will be rejected by the bank when reviewing the documents It is necessary to pay attention to: 4 dates and 1 point The date of issuance LC validity period expires The latest shipment period The delivery period See whether the latest shipment date is in line with the actual situation If it cannot be shipped before the latest shipment date, then change the order and then look at the beneficiary's information Whether there is a mistake in writing whether it can be transshipped Shipment in batches **Whether the terminology is consistent Whether the amount and quantity are fluctuating The most important thing is 46a 47A46a are all document requirements Look at the documents required in the LC Whether you can do it Will you see what some documents want to show Can it be displayed (for example, some BL requires the cost to be displayed or something, but some shipping companies will not display) (some passenger inspection certificates need to be stamped by who visas.) See if you can do it) At this time, you should also pay attention to the next delivery period to see if the documents required by the guest can be completed within the delivery period It also depends on the delivery point in** If in China, you can hand it over to the Chinese bank in the last day of the delivery period If the delivery point is abroad, you have to calculate the time and then look at the additional terms in 47a Some documents will be displayed here That is, what documents are still needed to be submitted What content needs to be displayed on the documents This is also very important When making documents, you must be careful If there is no document delivery period in LC The default is to submit the documents within 21 days after shipment, if there is no latest shipping period, then the time of validity in the LC, the validity period of the LC is the latest shipping period, which is called double expiration, this shipping period should be arranged by yourself when the document is made, and the date should not be mistaken.

There are three characteristics of a letter of credit:

1. Under the condition of L/C payment, the issuing bank is the first payer. Therefore, L/C payment is a kind of bank credit.

2. The letter of credit is a self-contained document independent of the sales contract.

3. The payment under the L/C is a kind of purchase and sale of documents: as long as the documents submitted by the exporter after delivery are consistent with the terms of the L/C, "the documents are consistent, the documents are consistent", the bank will guarantee to pay the exporter. The importer obtains a document representing the goods after payment.

L/C refers to the payment commitment issued by the bank in accordance with the application of the purchaser in the purchase and sale contract in the domestic economic activities with the documents that meet the terms of the L/C. According to the letter of credit business links involved between the buyer and the seller, it can be divided into buyer's letter of credit and seller's letter of credit.

The general procedure for payment by letter of credit is:

1. The parties to the import and export shall clearly stipulate in the sales contract that the payment shall be made by letter of credit.

2. The importer shall submit an application for issuance to the bank where it is located, fill in the application for issuance, pay a certain deposit for issuance or provide other guarantees, and ask the bank (issuing bank) to issue a letter of credit to the exporter.

3. The issuing bank shall issue a letter of credit with the exporter as the beneficiary according to the content of the application, and notify the exporter of the letter of credit through its ** bank or correspondent bank (collectively referred to as the advising bank) in the exporter's location.

4. After the exporter ships the goods and obtains the shipping documents required by the L/C, he shall negotiate and pay the payment to the bank where he is located (which can be the advising bank or other banks) according to the provisions of the L/C. (5) After the negotiating bank negotiates the payment, the negotiating bank shall indicate the negotiated amount on the back of the L/C.

Key service features include:

1. Domestic L/C is an off-balance sheet business, which is conducive to reducing the buyer's capital occupation.

2. The buyer can use the deferred letter of credit settlement, or can apply for the buyer's financing business such as bill billing, so as to alleviate the pressure of insufficient liquidity.

3. With the domestic L/C received, the seller can apply to the bank for financing business such as domestic L/C packaging loan to accelerate capital turnover.

Letter of credit refers to a written guarantee document issued by the issuing bank to a third party at the request of the applicant and according to its instructions, containing a certain amount of money and paying with the documents in accordance with the requirements within a certain period of time. Letter of credit is the most important and commonly used payment method in the world.

There are three main characteristics of a letter of credit:

1. A letter of credit is a self-sufficient instrument. The letter of credit is not attached to the sales contract, and the bank emphasizes the written certification of the separation of the letter of credit and the basic ** when reviewing the documents;

2. The letter of credit is a pure documentary transaction. The letter of credit is a voucher payment, not the goods. As long as the documents match, the issuing bank should pay unconditionally;

3. The issuing bank bears the primary liabilities for payment. A letter of credit is a kind of bank credit, it is a kind of guarantee document of the bank, and the issuing bank has the primary responsibility for payment.

Further information: Advantages and disadvantages of letters of credit:

Advantages: 1. When the letter of credit is used for settlement, the beneficiary (exporter) is guaranteed to receive money, especially when the exporter does not know the importer very well, and the advantages of the letter of credit are more significant in the foreign exchange control of the importing country.

2. The letter of credit makes the financial burden of both parties more balanced.

Disadvantages: 1. It is easy to produce fraud, because the letter of credit has a self-sufficient document, the relevant bank only deals with the characteristics of documents, and there are fake bills. 2. The procedures of the letter of credit are complex, there are many links, which is not only time-consuming, but also costly, and the links such as document examination should be more technical, which increases the business cost.

The characteristics of the letter of credit are:

1) L/C belongs to bank credit, that is, the bank guarantees the payment with its own creditworthiness. In other words, the payer of the letter of credit is the issuing bank.

2) L/C is a self-contained document, that is, although the L/C is opened according to the contract, but the L/C has been issued, the L/C is no longer bound by the contract, but is independent of the contract, a separate contract.

3) L/C is a document transaction, that is, the L/C is a document for trading, and has nothing to do with the specific state of the goods involved in the document, in other words, no matter what the document is involved in, how the L/C does not care, but only the documents specified in the L/C.

A reciprocal credit is a letter of credit between the buyer and the seller with the other party as the beneficiary. That is, in the reciprocity of blocking the bank**, the two parties to the transaction are the buyer and the seller, and the two parties each open a letter of credit for each other for their own import parts, and the two mutual letters of credit are the letters of credit.

From the perspective of the effective time, there are two ways to open the letter of credit: one is the letter of credit that takes effect at the same time, that is, the letter of credit issued by one party, although it has been accepted by the other party, but does not take effect for the time being, and when the other party opens a letter of credit and is accepted by the beneficiary of the card, the other party will notify the other bank that the two certificates will take effect at the same time; The second is the square of the split credit that takes effect separately, that is, the letter of credit issued by one party will take effect immediately after it is accepted by the beneficiary, and there is no need to wait for the other party to open the letter of credit to return.

The characteristics of the letter of credit are: first, the two parties must bear the obligation to purchase the goods of the other party, and the export of one party must be conditional on the import of the other party, which is related to each other and restricts each other, and the amount of the two certificates must be equal or roughly equal; Second, the beneficiary (exporter) and the issuer (importer) of the first letter of credit are the issuer (importer) and beneficiary (exporter) of the second letter of credit, and the status of the two parties is just reversed, and the advising bank of the first letter of credit is often the issuing bank of the second letter of credit, and vice versa. This kind of letter of credit is mostly used in barter, compensation, processing and assembly of incoming parts.

1: The issuing bank bears the primary payment responsibility. The payment method of the issuing bank is guaranteed by the bank's own credit, so as a bank guarantee document of the letter of credit, the issuing bank bears the primary payment responsibility for it.

2: A letter of credit is a self-contained documentThe application for issuance of the letter of credit is based on the content of the sales contract, so the letter of credit has a certain logical relationship with the contract. However, once the L/C is issued, it becomes a separate contract from the sales contract, and the issuing bank and other banks involved in the L/C business only act in accordance with the provisions of the L/C and are not bound by the sales contract.

Based on the relative independence of the L/C and the contract, the change of the terms of the L/C does not mean that the terms of the contract have been similarly modified.

3. A letter of credit is a purely documentary documentIn the L/C business, the bank only examines whether the documents submitted by the beneficiary are consistent with the terms of the L/C to determine whether it fulfills its payment obligations. If the important beneficiary submits the documents that meet the terms of the L/C, the issuing bank shall bear the payment liability. The importer should also accept the documents and want the issuing bank to pay the ransom bill.

The integrity of the specific goods has nothing to do with the bank. The importer may claim damages from the responsible party on the basis of the relevant documents and contracts.

1. The letter of credit is not based on the goods, it is paid by voucher. As long as the contents of the documents match, the payment should be made unconditionally;

2. L/C is a guarantee document of the bank, which is a proof of bank credit;

3. The letter of credit and the sales contract are not dependent on each other, and they are rented in their respective stools. The bank reviews the order with the letter of credit and the incoming and out** separate.

The above are the three characteristics of a letter of credit.

1. After negotiation, the buyer and the seller agree to use the letter of credit to settle the family hunger;

2. After the importer submits the application, the content of the L/C shall be agreed upon according to the requirements of the issuing bank;

3. The issuing bank shall send the application to the notifying bank after receiving the application;

4. Notify the exporter that the letter of credit will be bonded after receiving it;

5. The exporter checks whether the letter of credit is consistent with the contract;

6. The exporter shall hand over the L/C and documents to the negotiating bank within the validity period of the L/C;

7. After the negotiating bank submits the documents to the issuing bank, check whether the L/C is accurate; Jujube Sui Zhao 8, the importer picks up the goods with the documents.